Google's Big Amazon Problem

Exhibit A: Amazon's Kindle Fire. It's a 7-inch tablet that runs Android, and it's practically guaranteed to be the best-selling Android tablet of the year, after being on shelves less than two months. (Reviews of the Fire hit the web today. It's available for sale this month.)

Why does this matter? Mobile is a key part of Google's growth strategy, and Android is Google's most important mobile investment.

Here's the strategy behind Google's approach with Android: Google pays to develop the guts of the Android OS, to market it, to put a fresh user interface on it and to develop an ecosystem of apps. In return, it expects hardware makers that use Android to build in Google services.

Usually this isn't a problem. Because if hardware makers want to use any of Google's apps in Android — services like Mail, Maps, Calendar, even the Android Market for apps — they have to include all of them, and follow Google's rules about how they're used.

Enter Amazon. Amazon doesn't need Google. So it has taken Android and built its own interface, apps, and marketplace on top of it. The Kindle Fire can still run Android apps -- but it's out of Google's control, and Amazon has more influence than Google over who gets profit from the platform.

See the problem here? Google has spent a lot of time and money promoting Android, and now Amazon is swooping in and hijacking it.

If you just look at the aggregate numbers for Android adoption, this isn't a problem. But for Google specifically? Google has paid to create Android and to market it, and to create services on top of it. If the Kindle Fire (and its inevitable descendants) are successful, Google will have to pay again to get its services on those devices. If you're a Google investor, that's not ideal.